By Omodele Adigun
“Interest on every money you borrow from the Nigerian financial system now is double digit; twenty something per cent! This is the experience of Mr. Johnson Olaiya, Managing Director of HLA Interglobal Limited, a real estate outfit. In this interview in Lagos recently, he advised start ups to explore available channels of financing investments before plunging into credit abys, saying funding projects.
“ is not from raising loans alone. Debt is one of them; there is also what we call equity. If there is a property you want to develop, you can go into a joint venture, either with individual or with government. So if you start newly as a player in any industry, don’t overburden yourself with too many loans. At the end of the day, by the time you start paying back you will be having issues”
There are so many ways of financing projects or financing development.It is not from raising loans alone. Debt is one of them; there is also what we call equity.If there is a property you want to develop, you can go into a joint venture, either with individual or with government. There is also what we call crowdfunding. Crowdfunding is when you have a lot of people who believe in your vision and they contribute to make it happen. Then, if you are starting small too,you can raise money from friends, colleagues, family friends.As a start up, it is not good for you to borrow money. Interest on every money you borrow from the Nigerian financial system now is double digit; twenty something per cent interest! At the end of the day, by the time you start paying back you will be having issue. So you start newly as a player in any industry, don’t overburden yourself with too many loans.
The most important thing is to know what you are doing and be sincere. If you have integrity, people will believe in you. With God on your side, you will get people that will support your vision and aspiration.
Right from inception, our projection as an organisation has been to have an international outlook. That has been our driving force. The company is into real estate development as I said earlier on. We develop real estate, both commercial and residential. We have opened an office in UK, and we have an international representative in Sheffield, UK. Our vision is to go beyond shores.Lagos being the epicenter of real estate in Nigeria, that is why we are starting from Lagos. We also plan to have an office in Abuja and some other major cities across the country. Our mission is to bridge the gap in the real estate industry, using the instrumentality of integrity, quick service delivery at low cost without compromising standards.
Real estate business is capital intensive. But there is a saying that you can think big and start small. You can start by little private development or little property management. Real estate is a very big industry. You can start by managing little properties, and from there , you can grow. But if you have the financial muscle, you can start big. But for our own, because of our pedigree; where we are coming from; because of the crop of management that we have and the experience that we have garnered over the years, we are not starting at the low level. We have been involved in government concession but not as HLA Interglobal, although we have worked with various organizations as partner. And we are bringing the wealth of experience and connection to bear on the new firm.It is relatively new. But the people behind it are not new in the industry. We are real veterans.
There are lots of gaps in housing or accommodation generally in the country. Economists would refer to a situation as residual unemployment. Residual unemployment is when you are working but you are not satisfied; you are not really fulfilled; this is not what you want to do; you are doing it as if to say, let me just do something. So a lot of people are living where they are not supposed to live. So there is a lot of housing deficit; a lot of infrastructure deficit that we want to bridge. And one of our strategies is through Public-Private Partnership(PPP). We do a lot of PPP projects with governments. We also do private project developments as well.
Rising rent pandemic
Let me first of all touch on monthly rent. In advanced clime, that is the way that is done. Why it is easier in the advanced countries is that once your income is regular, you are sure. But in Nigeria, some people are owed two, three months; six months. Even government workers are also being owed. So in a situation where you can not pay, you will start having issue with your landlord. That is why the monthly rental payment has been an issue right from time. What can the government do to bridge the gap? One of the major issues is funding and the cost of funds. The cost of funds is highly exorbitant in Nigeria. We that are in the private sector know. Then there is no enabling environment by the governments. They are not making things easy. For instance you can go and price the iron rod; cement, which is the basic component of building a house, even ordinary sand. I was told recently that a tipper load of sharp sand is about N60,000. One of the things that cause this rising price is the cost of diesel. Most of these trucks use diesel.You can see that the economy is generally crippling the build industry and business generally in Nigeria.The cost of things are just too high. And eventually, when you manage to develop a property, you end up passing the cost down to the final end users. You always sell what you buy.I would not buy something for N10 and sell it for N8 I would also like to make small profit too.It is the final consumers that will bear the brunt. That is why most tenants are groaning today. Even an old house that you want to renovate, you still spend a lot, millions of Naira, to renovate it. That is why you see a lot of deficit in the housing sector. And which is also applicable to other industries as well, not only in the build environment alone.
I will say real estate industry is a green area. It is a blue ocean that has a lot of prospects. And considering the fact that Nigeria is a developing economy, there is a lot of opportunities in the real state into which people are yet to tap in Nigeria. Real estate is not just about accommodation alone, infrastructure too, markets, shopping complexes, commercial buildings etc are also part of real estate, including both their development and management. So the opportunities abound. In fact, more players are needed in real estate. I am talking of the professional players not just anybody; competent players.The prospect is very wide.
Like I said, fund, basically, is a big challenge and the cost of materials. These are the major challenges, because we are talking about development. A new development or existing structure needs to be renovated; needs to be maintained regularly. The cost of materials in the last two years has not been stable.
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